A sudden halt in tanker traffic through the Strait of Hormuz has triggered alarm across global energy markets, threatening to disrupt 15 per cent of global oil supply and 20 per cent of global LNG supply.
According to Wood Mackenzie analysts, oil prices could soar above US$100 per barrel if flows do not resume quickly.
The disruption follows US and Israeli attacks on the Iranian government, military and nuclear facilities.
In response, Iran has warned ships away from the waterway, while insurers have suspended coverage — effectively freezing one of the world’s most important energy arteries.
The closure has created what analysts describe as a dual supply shock: not only are current exports halted, but much of OPEC’s spare production capacity sits behind the blockade.
“The key question is when do vessels re-establish export flows,” said Alan Gelder, SVP of Refining, Chemicals and Oil Markets at Wood Mackenzie.
“No doubt, tanker rates and insurance will increase dramatically, but these costs would only be a small part of the oil price impact associated with a curtailment of oil flows if they last for more than a few days.”
Gelder said that in the most optimistic scenario, if Tehran cooperates with Washington, “it is plausible that it takes a few weeks for export flows to re-establish themselves”.
During that time, he warned, “oil prices are heavily risked to the upside”.
He drew parallels to early 2022, when fears of losing Russian supplies sent prices above US$125 per barrel.
“In the current scenario, oil prices over US$100/bbl are possible if transit flows are not re-established quickly,” he added.
On 1 March, eight OPEC+ countries (Saudi Arabia, Russia, Iraq, the UAE, Kuwait, Kazakhstan, Algeria and Oman) agreed to unwind part of their April 2023 production cuts, increasing output by 206,000 barrels per day in April.
The group will meet again on 5 April to reassess the market.
“The OPEC+ decision does not come as a surprise, due to the uncertainty surrounding the US-Iran tensions, and that the market for non-sanctioned crudes is tight,” Gelder said.
“There is, however, a risk that the OPEC+ decision is moot if flows do not resume through the Strait of Hormuz.”
While some Gulf producers can divert crude via Saudi Arabia’s East-West pipeline or Iraq’s Mediterranean routes, Wood Mackenzie noted that no alternatives can fully offset the loss of exports through the Strait.
Strategic stock releases from IEA member countries could offer temporary relief, but these nations account for less than half of global oil demand.
The LNG market faces similar exposure.
About 81 million tonnes (110 bcm) of LNG, mainly from Qatar, passed through the Strait in 2025.
“Disruptions to LNG flows would reignite competition between Asia and Europe for available cargoes,” said Massimo Di Odoardo, Vice President, Gas and LNG Research at Wood Mackenzie.
“With approximately 1.5 Mt of LNG exports at risk for each week that flows are halted, both Asian and European markets would need to draw more heavily on storage.”
Precautionary shutdowns of Israel’s Leviathan and Karish gas fields, together with possible interruptions to Iranian gas exports to Turkey, could amplify the strain.
While Di Odoardo said the reaction is unlikely to match the extreme price movements seen after Russia’s gas export cuts in 2022, he warned that “Monday will see a dramatic price jump at market opening, and any signal that disruptions could drag on would add further fuel to the rally”.
“The nearest historical analogue in our view is the Middle East oil embargo of the 1970s, which increased oil prices by 300 per cent,” Gelder said.
“Eclipsing this in today’s market concerned about significant losses of supply seems very achievable.”
